What are the keys to success in the coffee retail business?
I deeply believe in not just working in my business (this is a given) but also making sure that I spend time working on my business. Here’s what I mean:
- Working in the business: Includes all the day-to-day activities that are required to actually run my coffee shop. For example, making coffees, preparing food, cleaning tables, talking to customers, doing staff rostering, ordering supplies, etc. I work in the business just about every day that it’s open, and it’s all about consistency. Showing up and executing well is the name of the game.
- Working on the business: Includes all the higher level decisions I need to make about what my business sells, how I’m positioned, whether my systems and processes are working well, whether I have alignment across my goals and actions, and thinking carefully about the culture I’m building amongst my employees. Spending some time stepping out of the day-to-day and thinking about what I want my business to be, for which customers and employees, and how I’m going to achieve that.
This is what sets you up for success as a coffee shop owner. The “me-too” coffee shops and cafes have average sales revenue and profits. Mine is different in many ways and that’s why customers come to my shop, and employees want to work here. I’m very deliberate about this.
What are the best product and service ideas you have come across?
Obviously, I have to have the best coffee in my neighborhood.
This is a given, then I focus on food sales to round out my business. This is a HUGE opportunity in most coffee shops. I constantly remind myself and my staff to ask “Would you like any food with that?”. I think it directly contributes to 10-20% of my total revenue alone.
When it comes to food, I have found that these ideas work really well:
- Minimize the back of house and food preparation work required by designing your menu intentionally to be simple and fast. Customers want their food quick, and you want a straightforward operation. Focusing on simple construction line food items that customers want in your market will increase margins.
- Create unique food items that are only on the menu for a month or two at a time. Don’t have daily specials, have monthly specials. The reason being that you will likely get more sales, purchasing is more simple and your margins will be higher as you get some benefits from scale. Announce them in advance so regular customers can prepare their next trip.
- Coffee doesn’t just have to sell food, you can take opportunities to use food to sell coffee. Add low cost pre-made takeaway sandwiches or wraps as a break even (or at a small profit) to increase foot traffic and coffee sales.
- Simplify and shorten your food menu, the best and higher profit coffee shops offer a limited range of simple, high quality food options.
You’ll find your own style for local tastes and budgets in your area. I think this is a big part of working on your business, as I mentioned before.
What is the best way you have found to promote your coffee shop?
For local coffee lovers, it is word-of-mouth by far. This means having the best coffee and friendly service in an environment people enjoy spending time in. You need to beat the local competition on these factors.
For passers by I love the concept of sensory hijacking and have used it to great effect. Tip hot water over grinds from the day before in a nearby garden bed. The smell triggers customers before they walk past and it’s insane how often they then happen to feel like a coffee and drop in for one. We make sure the smell of our baked goods spreads down the street too, by opening all the windows and doors when we bake. Some of our best sales periods often follow.
I can think of three other must haves:
- A fully optimized Google presence with good photos and clear descriptions.
- Clean profiles, good ratings and glowing reviews on all the online platforms like Yelp and Beanhunter.
- Own the local workers and office crowd. Treat people from local businesses well and offer them what they need to frequent your shop to make it a no-brainer. Give local assistants and office managers free coffee every now and then, so they use you as a monopoly supplier of office catering. Or it might be offering a company tab or something like that, these investments pay off in spades.
Do the simple things well, and don’t miss any easy opportunities. It’s all about finding and picking the low-hanging fruit. Lately, I’ve started experimenting with delivery services like Deliveroo and UberEats to see if it works for my operation.
Do you have any special tips on how to grow sales revenue?
Yes, focus on repeat customers and ticket size. Here’s how I do it:
- How to improve loyalty: When you notice a new customer, offer them a loyalty card for a free coffee in every 10. I pre-stamp the card with 5 stamps to make the customer feel like they are winning. This is HUGE for me. A big driver of revenue, I’d even say 25%+ when you consider the long-term repeat customers it has won. Drill this into your employees too to make sure they do the same!
- How to increase ticket size: I’m repeating this one, but it’s super important and you always have to remind yourself and your staff. One EVERY order, ask your customer: “Would you like any food with that?” There is a 10-20% uplift in total sales revenue right here if you do it on every order.
Both simple, but hugely effective.
Have you found any sure fire ways to reduce costs?
There are lots, and I constantly review all my costs and suppliers. The one I’d highlight because it is a big bugbear of mine is wastage. It’s literally throwing away money. I have a system in place to measure wastage (through specially market bins) and I reduce, reuse and recycle at every opportunity I get. To me this is just as much about being a responsible business owner as it is about margins.
What are the best ways you have found to improve how your business operates?
Years back I got interested in data and business intelligence. Big words for a minor coffee shop operation I know, but it’s not that scary. Most cafes would probably benefit from producing a weekly Profit & Loss statement and reviewing this over time. Ask yourself simple questions:
- What days and times are you busiest?
- Can you introduce a new product or discount to improve sales in quieter periods?
- What products generate more or your sales, which generate the least? Should you highlight big sellers and potentially remove the low sellers?
- What’s your biggest expense and how could this be reduced?
- Are you balancing staff rostering to customer demand appropriately?
Doing this week after week, the impact of little improvements really adds up over time.
What are the best tools you found that helped you run your business?
Here are three that I can’t live without:
- A Point of Sale (POS) System system to make ordering smoother for customers and generate all that beautiful data to take a look at.
- A credit card reader so customers can pay on card.
- A staff scheduling, rostering and communications platform to coordinate with staff and make sure we have the help we need.
There are many amazing suppliers of these products on the market, shop around and pick the best for your needs.
What are your hard fought lessons for hiring, training and managing employees?
Hiring: When hiring, make sure you invest in your team. It isn’t just about the coffee. Baristas must know their coffee beans but also create the welcoming, personal environment that is often lacking in other retail experiences. A good chat with the barista keeps people coming back.
Training: As I mentioned, staff make so much difference in upselling and loyalty. The highest leverage activity I have ever found is those two simple mantras: loyalty card and offering food with coffee purchases.
Managing: Build the culture, make your coffee shop a place your employees want to be. The less it feels like work the better.
What's the best advice you received that helped you succeed with your coffee shop?
Do a deal with property developers to open your coffee shop in locations where they want to develop apartments or office buildings. The coffee shop is subsidized by the real estate developer in return for giving the area a better atmosphere. trendy and hip. The investment by the developer is nothing compared to the marketing benefit, especially for a large complex. The other benefit is you’ll have a large captive audience nearby.
What's the best advice you have to give other people in the coffee shop business?
Have a live dashboard for front of house staff to show how much coffee and food they have sold and served throughout the day, and their ratio of upsell. This is a good way to gamify the work experience and engage staff so you don’t need additional incentives. Plus it adds a little friendly competition and keeps everyone honest.
What mistakes do you see other small businesses making?
Not enough focus working on their business. I walk past a lot of coffee shops that just operate the same week after week, month after month and year after year. You constantly need to be trying new things, updating menus and decor, and remembering the small and effective operational improvements that really move the needle (but are easily forgotten).
What's the biggest lesson you learned while involved in the coffee shop business?
It’s harder than I thought it would be, but also more rewarding. Enough said, coffee shop owners will know what I mean. And if you’re entering the business, you’ll find out soon.
If readers could only take 3 things away from your interview, what do you hope they are:
- Spend time working on your business, not just in it.
- Have mantras for yourself and your staff, primarily “Would you like food with that?” on every order and “Would you like a loyalty card?” for every new face.
- Continuously work on your product, culture, systems and processes every week until you get them down to a fine art.
For the love of coffee… hope this helps!
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